Sweating Together

By David J Miller

A sweaty history of Peloton’s rise in becoming a billion dollar venture and how it created a digital community that would disrupt how we do fitness.

• Language: English
• Publisher: Ideapress Publishing
• Release date: May 24, 2022
• ISBN: 9781646870967

David J Miller

David J. Miller, PhD has spent the last decade researching, writing and teaching on the topics of innovation, entrepreneurship and startups at George Mason University and serves as the Executive Director of the Center for Innovation and Entrepreneurship at Mason’s School of Business. Miller has been a Peloton member since December 2016. He has a PhD from GMU, an MBA from the University of Chicago, an MSc from the University of London and a BA from the University of Michigan.

Book preview

Cover: Sweating Together by David J. Miller, PhD. A cover image for the book, “Sweating Together,” written by David J Miller, P h D. A photograph of an exercise machine is shown. Radial line designs are drawn around the machine with the lines, “How Peloton built a billion dollar venture and created community in a digital world.”

ADVANCE PRAISE

The Peloton story is a fascinating tale of entrepreneurship, creative destruction, and innovation. Like Amazon or Netflix, Uber or Sonos before, it almost always takes an outsider to envision an entirely new way of serving customers and disrupt a well-entrenched industry. That is exactly what Georgia Tech alums John Foley, Yony Feng, and their co-founders did, and I can’t think of better person to tell this story than David Miller, who’s been studying and teaching entrepreneurship for years and who for years tried to sell me on this concept until he finally succeeded!

—DR. ÁNGEL CABRERA, president, Georgia Institute of Technology

"In Sweating Together, David Miller takes a deep dive inside the phenomenon that is Peloton, one of the most fascinating and unexpected startup success stories of our time. He shows how Peloton is a combination of technology startup and wellness brand, whose success is predicated on a community of loyal users. A must-read for entrepreneurs, venture capitalists, fitness gurus, and anyone who wants to understand and navigate the exploding market—and world—of technology, fitness, and wellness."

—RICHARD FLORIDA, author of The Rise of the Creative Class

Peloton has reset the recreation landscape, and David Miller tells us how and why the founders were able to make Peloton something much bigger than an iPad connected to a stationary bike. Miller also tells his own story of his journey from Peloton skeptic to addict so we can understand the brand’s hold on the consumer’s mindset and why he thinks Peloton could become one of the world’s largest companies.

—SETH GOLDMAN, co-founder of Honest Tea, Eat the Change, and PLNT Burger and board chair of Beyond Meat

"David Miller delivers a first-of-its-kind deep dive into one of the world’s most fascinating companies, documenting his own journey from skeptical academic to self-described Peloton addict along the way. Sweating Together details how a company became a movement and why Peloton has changed everything—from working out in the basement to creating a community-driven megabrand."

—JASON KELLY, author of Sweat Equity: Inside the New Economy of Mind and Body

"In Sweating Together, Dr. Miller powerfully captures the benefits of social connections in physical exercise. While he highlights the successes of Peloton through the lens of entrepreneurship, it’s clear that what emerged from this successful company is a large community of passionate and dedicated Peloton enthusiasts. A powerful lesson from this book is the importance of social support in our physical activities. Sweating Together is a brilliant case study of leadership, entrepreneurship, well-being, and innovation."

—NANCE LUCAS, PhD, executive director and chief well-being officer, Center for the Advancement of Well-Being, George Mason University

David combines his passion for and understanding of entrepreneurship and innovation and his own personal journey to illustrate key features that have driven the remarkable growth of a highly adaptive and entrepreneurial company, Peloton. Peloton’s journey, with its relentless focus on the customer, is an excellent case study providing key insights for any innovator looking to make a meaningful difference in the lives of the people and communities they serve.

—SARAH E. NUTTER, PhD, Edward Maletis dean and professor of accounting, University of Oregon, Lundquist College of Business

David J. Miller has colorfully and carefully captured the spirit of the Peloton brand, its founders, and its impact on how humans across the world consume their workouts. Expect a deep, meticulous dive into the behind-the-scenes moments that will surprise and delight Peloton lovers and skeptics alike, whether they’re interested in the sweat or the sweat equity that goes into creating a globally-adored, billion-dollar business.

—LIZ PLOSSER, editor-in-chief, Women’s Health and author of Own Your Morning: Reset Your A.M. Routine to Unlock Your Potential

"David Miller, a leading entrepreneurship professor with a passion for Peloton, was practically built in a lab to write this book. In Sweating Together, he combines his love of the brand with his knowledge of branding to create a riveting look at the wild and rapid rise of Peloton. Whether you’re part of the Peloton phenomenon or perplexed by it, this book is a must-read."

—CRYSTAL AND TOM O’KEEFE, hosts of The Clip Out

SWEATING TOGETHER

SWEATING TOGETHER

HOW PELOTON BUILT A BILLION DOLLAR VENTURE AND CREATED COMMUNITY IN A DIGITAL WORLD

DAVID J. MILLER, PhD

#ChicagoBorn

Ideapress Publishing logo.Ideapress Publishing logo.

Copyright © 2022 by David J. Miller, PhD

All rights reserved. No part of this book may be used or reproduced in any manner without written permission from the publisher, except in the context of reviews.

Printed in the United States.

Ideapress Publishing | www.ideapresspublishing.com

Cover Design: Tim Green, Faceout Studios

Interior Design: Jessica Angerstein

Cataloging-in-Publication Data is on file with the Library of Congress.

ISBN: 978-1-94085-897-5

Special Sales

Ideapress Books are available at a special discount for bulk purchases for sales promotions and premiums, or for use in corporate training programs. Special editions, including personalized covers, a custom foreword, corporate imprints, and bonus content are also available.

To Emily, Levi, Sari, and Lincoln for supporting me through this evolving ride

TIMELINE OF SELECT EVENTS IN PELOTON’S HISTORY

2012

Peloton founded

$400,000 seed round of funding

$3.5 million Series A Fund Raise

2013

First prototype bike designed and created

Kickstarter Campaign raised a little over $300,000, sells 200 bikes

First Instructor Hired -Jennifer Schreiber Sherman (JSS)

First Retail Showroom -Short Hills Mall in New Jersey

2014

Generation 1 bike released and delivered

$10.5 million Series B Fund Raise

2015

Apple iOS App launch

$30 million Series C Fund Raise

$75 million Series D Fund Raise

2016

35,000 Connected Fitness Subscribers (midyear)

Commercial/Hotel bikes Announced at Consumer Electronics Show (CES); later discontinued

Palo Alto Showroom opens

Author clips in for the first time

2017

Commercial bike announced at CES (later discontinued)

Denver showroom opens in Cherry Creek Shopping Center

108,000 Connected Fitness Subscriptions (midyear)

$325 million Series E Fund Raise

2018

Tread (later known as Tread+) Unveiled at CES, deliveries begin in fall

Robin Arzón streams classes from the Winter Olympics in Pyeongchang, South Korea

Tread Studio Opens in NYC (will be used for yoga also)

Outdoor Runs and Walks -app renamed Peloton Digital

245,000 Connected Fitness Subscriptions (midyear)

Author visits Mothership for the first time

New Bethesda Showroom Opens (author meets Jess King)

Peloton Yoga announced with full time yogis

St Louis Showroom opens

UK and Canada Launch

2019

Live yoga streaming begins

Peloton is a clue on Jeopardy game show

Music Publishers sue Peloton; class purges begin

German Launch (first foreign language)

Peloton Home Rider Invasion renamed Peloton Homecoming

511,000 Connected Fitness Subscriptions (midyear)

102,00 Digital Subscribers (midyear)

Initial Public Offering (September); PTON opens at $27 and closes at $25.76

Peloton introduces Artists Series classes

Amazon Fire App launched

Peloton acquires Tonic, a Taiwanese maker of its hardware

Open showroom in O’Hare Airport in Chicago (later closed)

Peloton Wife television commercial controversy

2020

Bike+ launched, tread launched (original tread renamed Tread+)

Covid-19 global pandemic

Peloton closes production, pauses opening of Peloton Studios New York (PSNY)

Instructors across disciplines teach from their homes (including UK instructors)

Author completes 1,000 cycling class

ESPN - Peloton All-Star Challenge produced and aired

1.09 million Connected Fitness Subscriptions; 316,000 Digital Subscribers (midyear)

3.1 million total members on the platform (people with accounts)

Fit Family classes introduced, including cardio and yoga

Peloton Pledge introduced; $100 million commitment over 4 years

Health and Wellness Advisory Council announced and initial members introduced

Barre classes and Bike Bootcamp classes introduced (September)

Beyoncé x Peloton partnership announced with HBCUs

Peloton announces acquisition of Precor, including 2 U.S. manufacturing facilities

Announcement and opening of Harrod’s showrooms

Global Showroom Count 118 (37 international)

2021

U.S. and Canada tread deliveries begin

Peloton completes $1 billion convertible bond offering

Consumer Product Safety Commission issues Tread+ advisory

Peloton issues recall of 125,000 Tread+ and treads and suspends sales of both

Introduction of Mood Series classes

Collaboration with Adidas | Adidas x Peloton

Peloton announces; later breaks ground on manufacturing facility in Ohio

Expansion to Australia with bike and Bike+

Peloton announces corporate wellness with United Health Group

2.33 million Connected Fitness Subscriptions; 866,000 Digital Subscribers (midyear)

5.9 million total members (accounts on the platform)

Peloton tread sales resume; unclear when Tread+ will be sold again

Peloton announces its own, private label apparel line

Peloton Studios London open, UK tread instructors introduced

Author passes 5,000 total classes taken on the Peloton platform

Sex and the City uses Peloton bike to end the Mr. Big character

Sweating Together sent to printers

CONTENTS

PROLOGUE

I Do Not Want Those Shoes

INTRODUCTION

Living in an Entrepreneurial World

CHAPTER 1

John Foley, Peloton, and Its Sweat-Driven Business Model

CHAPTER 2

Fitness in the Middle of the American Bell Curve

CHAPTER 3

Members, Members, Members: Customers

CHAPTER 4

The Instructors: Talent and Success in Today’s Economy

CHAPTER 5

Physical Space in a Digital World

CHAPTER 6

Searching for Sweat, Finding a Community

CHAPTER 7

Competitors, Haters, and Hubris: Potential Bumps in the Road

CHAPTER 8

The Tread, the Globe, and Growing Beyond Sweat

CHAPTER 9

Concluding Thoughts of a Peloton Addict

APPENDIX A

Peloton’s Mission and Values

APPENDIX B

The Peloton Pledge

APPENDIX C

Select Instructor Quotes

APPENDIX D

Crying on the Bike

APPENDIX E

High Fives of Gratitude for the Peloton Community

REFERENCES

INDEX

PROLOGUE

I DO NOT WANT THOSE SHOES

The day started as it begins in millions of American homes, with a discussion about money. It was November 2016 and we were heading into the holiday season.

You spent how much on an exercise bike? I growled at my wife, Emily.

Two thousand dollars, she replied with confidence. My wife is a beautiful, successful physician; a partner in a top medical group at a top hospital in suburban Washington, D.C.; and has always been serious about fitness. It was not surprising for her to make this kind of purchase without consulting me. It was silly of me to protest.

In my defense, I had not yet prepared a simple cup of coffee, and our three kids (all under 10 years old at the time) were awake and in search of toys, iPads, milk, and food. Our two dogs, Moose and Scout, with a combined weight of 230 pounds, were unaware that their main caregiver had spent so much on an exercise bike, and they barked loudly in the background.

The problem for me was that we already owned a treadmill and a stationary bike, and Emily was a member at a high-end gym (an Equinox), less than a mile from our home. Moreover, our neighborhood was exercise friendly, with plenty of green space amid quiet streets and pathways from Rock Creek Park and the Potomac River to the National Mall.

When Emily told me she had bought the $2,000-plus Peloton indoor cycling bike, I was a jogger. I would plod slowly around our neighborhood or high school tracks or run on our 10-plus-year-old Precor treadmill in the basement. The treadmill and a string of desirable neighborhood choices had saved me from health club memberships for more than a decade. Throw in some push-ups and other random exercises, and I was a decently healthy 44-year-old father of three when the Peloton appeared in our home in 2016.

If I had to run on the Precor dreadmill in the basement, I would. In reality, this meant I often evaded exercise when the weather was foul or the daylight was fleeting (October through February). I commuted in D.C. traffic, often getting home well after dark and rarely wanting to run in the basement, no matter what was on TV or how good a music playlist I believed I had created.

Besides not joining a health club, I did not participate in trendy fitness classes, whether yoga, cycling, or bootcamps. As I soon would find out, the bike my wife had purchased came from the boutique segment of the fitness industry. I had always felt that sweating and suffering were a private affair unless one was on a team. However, sports teams ended for me in college, and those intramural experiences were mostly social.

That initial Peloton discussion did not last long. I’d known Emily for more than 20 years, and we’d been married for more than 10 years: the Peloton bike was coming to our house.

When I found out that it carried a subscription fee of $39 a month, I nearly revived our talk about the purchase, but also immediately realized that the company founders were super sharp. Clearly this fitness equipment had a different business model from any other we had owned, a recurring payment. It was interesting as well as irksome.

Little did I imagine that the Peloton bike and platform would change our lives forever. When the bike arrived I was still annoyed with Emily, and I ignored the Peloton in our basement. The sleek, black carbon frame of the new bike made the treadmill look archaic, and we shoved our old Tectrix stationary bike against the basement wall where it would eventually find a purpose holding water and towels for the Peloton rider.

While the bike certainly looked attractive, and Peloton commercials featuring a supermodel-type mother and her family enjoying a beautiful modern life with it made the lifestyle appear intriguing, I did not even consider riding during its first two months in our home. Emily insisted on purchasing cycling shoes for me as most users choose to clip in to the Peloton bike’s pedals, something I had never done. Also, I wear a size-15 shoe, so locating a pair was not an easy task for her.

When the Giro brand cycling shoes arrived, I refused to look at them, much less use them or the bike, and the shoes sat on the top step of the basement staircase. I remember thinking to myself: I am not touching those clip-in shoes. Emily refused to return the shoes and ignored my childish behavior and the size-15 cycling shoes sat in limbo at the top of our basement stairs for weeks.

I walked past the cycling shoes on the stairs and the Peloton bike itself a few times in the fall of 2016 as I jogged on our Precor treadmill, communicating my disapproval of the Peloton through my cardio choices. Fate, of course, had other plans, and by late December 2016, I would be brought to the Peloton by an embarrassing performance in a low-level adult hockey game, which included me vomiting a burrito on the bench. That incident jarred me into questioning what kind of shape I was really in.

On December 30, 2016, I took my first ride on the Peloton. It was also the first time I took an indoor cycling class and clipped in to a bicycle. As a kid in the 1980s, I rode BMX and freestyle bikes, and in the 1990s I rode mountain bikes. The Tectrix bike we owned was the proverbial coat hanger so it had been nearly 20 years since I had any real two-wheel action of any type.

My first Peloton ride was a 20-minute Beginner Ride with an instructor named Jennifer Jacobs. It was an on-demand class. It was no different from streaming a TV show or movie except the content was coming to an exercise bike and the data from my effort was feeding back to the Peloton service in real time, which was reflected in my placement on the class leaderboard, a list that ranked everyone that had ever taken the class. My plan was to find out what indoor cycling was about with an engaging, motivating instructor. I was a rookie, and my last group fitness class was a Krav Maga self-defense class with a bunch of cops and FBI agent types in Rockville, Maryland, outside of D.C. I had no idea what might happen in an indoor cycling class.

I would quickly learn that Peloton had an ensemble of about a dozen instructors, some with larger-than-life personalities. The vibrant social media presence of the instructors’ and the riders’ passion for them were among the first clues that told me Peloton was different from any fitness program and possibly any company I had ever seen before, as a consumer or an entrepreneurship researcher.

In early 2017, just weeks after my first ride, I took notice of Peloton members’ fanaticism when Emily introduced me to the Official Peloton Member Page on Facebook (it was called the Official Peloton Riders Page at that time). People were posting fantastic tales of health benefits and more from riding their Peloton bikes. The page was like a 24-hour-a-day digital revival service on Facebook, members recounted miracles of diseases overcome and control over life regained.

Peloton riders were posting pictures of themselves riding with disco lights flashing in their homes, sharing their rides, even crying while riding, planning group rides, and referring to their leggings as magic pants. Peloton members were constantly referring to themselves by their Peloton usernames, or leaderboard names, employing hashtags as they identified themselves (#ChicagoBorn is the leaderboard name I would eventually settle on). It was odd and I was shaking my head in confusion as I read all those posts, but I could not turn away.

I began discussing what I was witnessing with my entrepreneur-ship students at George Mason University, even opening my Facebook account in class to show them this consumer behavior, and then asking whether my business students had ever seen anything like this and what entrepreneurial and business principles were at play.

I slowly started to ride the Peloton more frequently in early 2017, using our treadmill less than in past winters. First, I began to appreciate the challenge of indoor cycling and the quality of the instructors and their fun, demanding approach. Then I would begin learning about the diversity of class types and different approaches to fitness. I truly enjoyed the convenience of choosing from thousands of challenging workouts in my home and loved seeing the Pelo-puddles (a term I learned on the Facebook page) of sweat forming under the bike. They were proof that I was getting something done. I wanted to ride more.

As I began to ride more and share more with my students into 2017, I realized that my growing desire to ride was part of a phenomenon envisioned by CEO John Foley and the other four founders of Peloton. The team began to build the venture in 2012, and by 2017 I was a convert and growing fascinated by their business model. Since I was 16, I had gone into gyms—ranging from local owner-operated neighborhood facilities to franchises of international chains and national leaders in the high-end segment, including the East Bank Club in Chicago, where Oprah also sweat it out. I had never been gripped by any gym or exercise program the way that Peloton took hold of me.

I grew addicted to riding, and I found fellow fanatics, tried different instructors, and visited Peloton-related accounts on Instagram and Facebook. My fitness levels improved dramatically. I agreed with Men’s Health and Fitness in its 2015 write-up that Peloton was the best cardio machine on the planet.

By spring of 2018, I was waking up at 5:15 am on Tuesdays to ride grueling tabata style classes in the pain cave at 6:00 am with Pelo-friends from across the country and Peloton instructor Robin Arzón. I was spending an hour a day with Peloton working on my fitness and overall well-being, and I was going beyond that searching for new workouts, places to explore, and options for food and fuel. I was a daily active user of Peloton’s platform, and I was loving it. I began streaming Peloton’s stretch, yoga, and strength workouts. I wanted more and more, and the company would provide it, offering new products, services, and features to feed my demands.

I was not alone. The Official Peloton Member Page on Facebook was getting bigger each month as I watched the company. When I joined that Facebook group in February 2017, it had just over 25,000 members. By early 2018, membership topped 75,000; by late January 2019, the number was 146,000; and by September 2019, it approached 200,000. In September 2020, over 335,000 people were members of the Facebook page and when the four year Peloversary of my first ride arrived on December 30, 2020, there were nearly 380,000 on the page. By February 2021, four years after I started watching the Facebook page, it went over 400,000 members. Thousands of other Peloton groups emerged on Facebook, Reddit, and Instagram with millions of members and followers. We will explore the major role of social media throughout this book as it has been leveraged by many segments of the Peloton community.

The growth of Peloton-related social media represents the growth of product sales and membership. While our bike was one of the first 100,000, according to the company, by mid-2019, more than 1.4 million users were registered on the Peloton platform, which by then was streaming indoor cycling, running classes, boot- camps, strength training, yoga, and more. By March 2020, there were 2.6 million registered members representing more than 1 million connected fitness devices (Peloton bikes and Treads, which are the company’s treadmills). This number would grow even greater through the Covid-19 pandemic and Peloton would boast more than 3 million registered members working out on more than 1.4 million connected Peloton machines by fall 2020. By mid 2021, the company counted over 5 million registered members and 2 million connected devices (bikes and treadmills).

The book that follows will tell three stories: one of a fitness, innovation, and business revolution that arrived via a New York startup’s bike that goes nowhere; another of a consumer (me) who became addicted to that venture’s products and services, altering their approach to fitness, health, well-being, and life; and lastly, the story of the rise of the business of well-being across the global economy.

This is a book I never planned to write. In fact, I was working on a manuscript based on my research into high-growth student entrepreneurs such as Bill Gates of Microsoft, Mark Zuckerberg of Facebook, Wendy Kopp of Teach for America, Phil Knight of Nike, Larry Page and Sergey Brin of Google, and more. But my wife bought a Peloton bike and some clip-in shoes for me and somehow here we are discussing the future of our society, community, and economy through the lens of that bike and the world that has emerged around it.

INTRODUCTION

LIVING IN AN ENTREPRENEURIAL WORLD

Madonna sang about a material world in the 1980s. Today we live in an entrepreneurial world. For some time we called it the post–Cold War era, the information age, and the knowledge age, but it is clear at this point that innovation and entrepreneurship are the driving forces behind societal and economic change.

You can see it everywhere: on TV shows such as Shark Tank, The Profit, and Bar Rescue and in the public’s fascination with empire builders such as Jeff Bezos of Amazon, Elon Musk of Tesla, Oprah Winfrey of media fame, and Sarah Blakely of Spanx. It seems as if every athlete, musician, and celebrity dreams of crossing over to entrepreneurship. MBA achievers want to be founders now, not bankers or consultants.

Moreover, America’s lionization of founders has gone international with the global innovation economy expanding to Latin America, India, Russia, and China. The billionaire population grows each year, proving that this entrepreneurial economy is the real deal, and people of all cultures and geographies want to participate.

Entrepreneurship and innovation have not always been a global aspiration. Consider the Cold War, General Motors, and IBM. For most of human history, few individuals had the notion, let alone opportunity, to create a new organization. Today people from Moscow to Michigan and Madagascar know that an inspired individual can build a venture that changes the world and creates billions of dollars in wealth along the way.

The entrepreneurial economy that we are living in (and by most accounts enjoying) has been brewing for decades, but we are just beginning to understand what is going on. The Economist Magazine produced a special issue focusing on the Entrepreneurial Revolution in 1976, and management guru Peter Drucker published the book Innovation and Entrepreneurship in 1985. Only now are we comprehending the art and practice of entrepreneurship.

A LOSER’S BUSINESS

Entrepreneurship is a loser’s business. I make this statement to my students during the second session of my entrepreneurship classes each semester. I get the students hyped during the first session, introducing myself and my research into student startups such as Facebook, Boosted, Grubhub, Google, Nike, and Teach for America. I remind them that undergraduates started most of these ventures and that young leaders changing the world is becoming a regular occurrence. I ask my students to share their favorite company, founder, or new product with the class. Responses in recent years range from Musk and Bezos to Berkshire Hathaway CEO Warren Buffett and Oprah, with Apple, Airbnb, Spotify, and other consumer brands regularly mentioned. The students recognize the innovators and their wares, and love them.

When the students arrive for the second class, I tell them the truth: Entrepreneurship is a loser’s business. I repeat this throughout the semester at extracurricular events and clubs and in small meetings and office hours with students, alumni, and community members.

Entrepreneurship is a loser’s business. I say it often because we need people to understand how difficult it is to create any business, especially anything that employs more than a handful of people.

The data are there to prove that entrepreneurship is a loser’s business. Most new ventures fail. It does not matter whether we are talking about a bunch of Ritalin-fueled engineers in California’s Silicon Valley attempting to be disruptive and innovative or a team trying to run a seemingly simple business, such as a cupcake bakery or a suburban landscaping service.

In most cases new ventures die young. A majority of new businesses in the United States will not make it to five years. If you don’t believe me, check the Small Business Administration website, call your local banker or chamber of commerce, or score the portfolio win rate of the most successful investors in Silicon Valley, Boston, or New York.

All that failure aside, some ventures will survive, and a few will prosper, hire many people, and change communities. A smaller group will become high-growth ventures and change industries, cities, regions, and lives. Peloton falls into that last category.

These high-growth, disruptive companies catch the public’s eye because of their ability to radically change how we live, work, and play as well as to create massive wealth for their leaders, investors, and others. They are about the future and many find this part of the economy intoxicating.

Learning about world-changing new ventures and figuring out how they grow and thrive is a big part of my job as a professor at a major public research university with a range of stakeholders. Students and community members want to learn about entrepreneurship and build their tool kits for the day when they launch their own business. In fact, surveys show that most Millennials hope to own a business, so there is strong demand for our courses and extracurricular programs. Generation Z, growing up with eBay and Etsy and the gig economy, see the world in much the same way.

I was among the business school students in the 1990s who first began taking entrepreneurship classes and choosing startups over banking and consulting careers. Today entrepreneurship is